Digital advertising is changing the way newsmedia companies do business

By Earl J. Wilkinson

As we lead up to INMA’s European Conference in The Hague, The Netherlands, on September 26-28, here’s a sneak peak at some of our speakers and their thoughts on the challenges and opportunities facing our industry.

This week, we’ll hear from Mike Jarvis, a member of the board of Advance, based in London, UK, who gives us his take on advertising business models, paid content, digital ad efficiency, and digital advertising.

INMA: Is the ad business model working properly nowadays? More and more surveys prove advertisers are dissatisfied with the efficiency of their ads on newspapers’ Web sites and, therefore, want to pay less for them. Publishers, on the other hand, who are not happy with ad revenues, decide to introduce paywalls on their sites, which could make advertising less seen and popular (due to lower readerships).

Jarvis: The ad business model, like all business models in this post-recession age, is under serious scrutiny as the industry comes to grips with higher consumer demand, ever decreasing revenues, and the more unique issue of paywalls blocking the very currency of online advertising. The digital industry is still a young industry, so is it surprising that everyone is still finding their feet? The major challenge for newspaper Web sites is how to fund an expensive editorial workforce, producing high-quality content with diminished income from online advertising campaigns.

INMA: What is your opinion on paywalls and paid content? Is it the only way for newsmedia companies to maximise their revenues from the digital operations?

Jarvis: It’s certainly understandable that publishers are moving toward a paywall/premium content model, but consumers are having a hard time accepting a paywall when similar content is available free of charge. This is particularly true for newspaper sites with broad content. It will work for specialist publishers providing a unique service and offering unique insight. But the challenge for publishers with a more fluid editorial profile is to find a USP (unique selling proposition) in the truest sense of the word — finding something to sell to consumers that doesn’t exist elsewhere.

This is, of course, based on the more classical online business model and revenue coming as part of the standard display sales. However, the wealth of technology that is starting to flood the market is opening up different business models where monetisation of every impression is possible without cannibalisation of the classical business. Newspaper sites are also now changing their creative structure to enable deeper content partnerships and integrated solutions that engage the user for longer periods. And, of course, the use of video is growing exponentially with newspaper publishers creating their own video content.

INMA: What can/should publishers do to improve the ad efficiency on their Web sites/apps?

Jarvis: On the editorial level, publishers need to truly understand their audience and develop and focus the brand so that it’s cohesive and relevant to their audience. Understanding audiences and leveraging this data is the key to success in the future. Commercially, publishers need to be flexible. They need to understand that the very nature of digital means that it moves quickly, and you cannot be left to play catch-up if you want to be a serious player in the market. Real-time bidding, while proving useful when used carefully, certainly isn’t the silver bullet some thought it might be.

Publishers need to be very careful to balance ad efficiency and revenue generation with protecting the rest of their digital business.

Jarvis: Yes, but that would mean many of our media houses shutting down! Realistically, each publisher has to more than ever define what makes them unique. As long as their site users believe this, the ad dollars will follow.

INMA: What are the advertisers’ expectations toward digital advertising? What’s more important: ad effectiveness or reach?

Jarvis: Advertisers seem to want everything: reach and effectiveness. In this case, the objective to build brand awareness then reach is critical. But for those demanding a consumer response, direct sales, or lead generation, effective reach becomes the measure of success. New developments demonstrate a definite move toward increased efficiency rather than mass, uninformed reach. Audience-based buying means it’s now possible to target far more effectively than before. But this will put more pressure on the publisher to provide tools to help the advertiser measure the success (or lack thereof) of their advertising investment.

For more information on and registration for our European Conference, please visit our Web site. See you in The Hague! INMA correspondent Marek Miller will be blogging live from the Conference at forum4editors.com.